National Association of Home Builders Discusses Economics and Housing Policy

The Employment Situation for June – Labor Market Momentum?

Surprising strength in payroll growth and another decline in the unemployment rate threaten to make this recovery begin to feel like a real recovery.

The Bureau of Labor Statistics (BLS) released the Employment Situation report for June. The establishment survey showed payroll employment expanded by 288,000. The April and May figures were revised upward by a total of 29,000, bringing them to 304,000 and 224,000, respectively.

This brings average monthly payroll growth to 248,000 since the December/January weather slowdown. Including January, the average monthly growth has been 231,000 for the first six months of 2014, compared to the 194,000 average for the twelve months of 2013, and 186,000 in 2012.

The unemployment rate dropped to 6.1% from 6.3% in May, and 7.5% in June 2013. The household survey showed a gain of 407,000 persons employed, a 325,000 reduction in unemployed persons, and an increase of 81,000 in the labor force.

These numbers indicate steady improvement in the labor market, and an acceleration in the pace of job gains. But two other labor market statistics point to continuing weakness: part-time employees and discouraged workers. The numbers of workers employed but working part-time for economic reasons (e.g., hours reduced, only part-time work available) increased in June to over 7.5 million. This category of worker is down from its peak but remains elevated.

Discouraged workers are those who are willing to work but believe no jobs are available. They have looked for work in the most recent twelve months, but not the last four weeks. They are not included in the unemployment rate. In June there were 676,000 discouraged workers, down from its peak, but a component of the depressed labor force participation rate that overstates the improvement in the unemployment rate.

Both of these statistics suggest that the gains in job growth and the declining unemployment rate are not all they seem. A full labor market recovery won’t be complete until these underlying numbers show more improvement, but the visible strength in today’s report is encouraging.

This is a rather thorough report on the historic and current employment situation, but it would benefit us to see some comprehensive analysis of how the overall employment scene will impact the ability of families to buy and finance home purchases now and in the future. I would like to see the NAHB economists plot the total FULL-TIME-LIVING-WAGE employment numbers against the sale of newly constructed homes. Yes, it is good to know that the resale markets are benefiting from increases in the labor participation rates, but NEW construction of homes has more significance in the GDP than resale volume. Discouraged workers will not be a part of the available client base for builders. Nor with under-employed workers. Minimum wage earners are unlikely to qualify for home loans for a newly built home. And anyone who has left the labor pool because they were Aged-Out is also unlikely to have dreams of owning a new home.
We need more jobs in the USA and these jobs need to be at a wage high enough for families to be priced-in rather than left-out of the American Dream.
It is time to figure out a reliable way to calculate how the labor participation rate, total jobs, and wages will provide the American Family with the resources to once again dream of owning a new home.